My father-in-law opened a mutual fund UTMA for my two kids when they were little and has made periodic contributions over the years. They're high school and college now. Each account has about $10k in it, about half is unrealized capital gains.
The problem is that the fund he selected is awful with outrageous fees. I've known this a long time, but he would have been very offended if I tried to meddle so I've just let it go. After all, it's his generosity.
My oldest is turning 18 this year, going to college, and I've diplomatically used this as an excuse to mess with the UTMA accounts, so there's an opportunity to move the money into a better long-term choice.
How do we best avoid the Kiddie Tax on the capital gains? My kids don't need the money, I'd like to have them sock it away in VSTAX or similar and pay minimal fees.
I don't mind taking a few years to do this. One idea I had was to sell $2k-4$k of stock each year (generating $1k-2k capital gains, close to the Kiddie Tax limits), move the funds to a new taxable account and advise them to buy a nice index fund.
Is that a sound strategy? Any better options?
Edit: Assume they have no other income or income from summer jobs is very low, $1-2k at most.